As the deadline for the bids to buy Jet Airways looms, the $1.2 billion debt-stricken airline is likely to go down into the history books.

At one time, Jet Airways was the biggest and arguably, the best airline in India. With the rapidly expanding aviation market and more Indians choosing air travel as their primary way of reaching their destination, Jet Airways seemed like it was destined for success.

The privately owned carrier enjoyed very high highs. With over 120 aircraft flying to almost 1000 destinations, it seemed like Jet Airways had overcome the odds. Previous to this, privately owned airlines in India did not fare well. For example, Vijay Mallya’s Kingfisher Airlines went down in a very similar, but different fashion. While Jet Airways ran profitably for a number of years, Kingfisher Airlines on the other hand, never enjoyed a profitable year.

But while Jet Airways enjoyed the highs, it also stumbled to very low lows.

And today, with the window of opportunity to save Jet Airways closing, and no company putting out a serious bid for the troubled airline, it seems like this is the end.

So, the question on everyone’s mind is: Why did it fail, when it seemed like success was the only option for Jet Airways?

Let’s go down the rabbit hole and try to understand the reasons behind the bankruptcy.

Not the first time

Firstly, this is not the first time that the airline is in trouble. When the 2008 financial crisis hit, the still growing Indian Aviation market declined. Passenger numbers dropped and airlines were forced to either drop the prices, which they did at first or to raise them when fuel prices soared.

Jet Airways was not any different. The company did the same as everybody else and Indian passengers were on a price rollercoaster.

But Jet Airways had two more problems. The airline recently acquired Air Sahara, which cost a hefty sum of money.

Secondly, Low-cost carriers were starting to dominate India‘s skies. With the financial crisis impacting traveler numbers, Jet Airways did not make any decisions to soften the hit. Passengers started to prefer low-cost airlines like IndiGo because of their lower ticket prices and Jet Airways was in even more trouble. But the problem was, that Air Sahara was not a low-cost carrier. The airline ran the same business model as Jet, so essentially Jet Airways just paid a lot of money for additional aircraft, routes and parking slots.

Instead of trying to change the way the airline operates, the chairman of Jet Airways, Naresh Goyal told the world to hold his beer.

The company fired 1900 employees. Just like that. Sure, you could understand the move – the airline was in debt, it needed to reduce running costs to keep flying. However, instead of reducing operating costs, Jet Airways set themselves up for another crisis.

Employees of Jet Airways did not take the news well and went to the streets to protest the decision. After a few days of protests, Naresh Goyal caved in and re-hired the workers. Everything seemed okay for a while, at least in the Human Resource department. The airline was still losing money.

Jet Airways employee protest

But in 2009, Naresh Goyal asked the world to hold his glass once more.

No union for you

Jet Airways’ pilots formed a union called the National Aviators Guild. Two pilots from Jet Airways played a key role in the formation of the union.

That fact did not go down well within the company. Subsequently, to joining the union, the two pilots were sacked.

This time, the pilots went on strike. Instead of meeting the protests with empathy and re-hiring the pilots, Naresh Goyal expressed a lot of anger. Speaking to “The Times Of India” in 2009, he said: “I will not hesitate to close down the airline […]. I have no disagreement with pilots. However, I cannot tolerate any breach of the basic principle of discipline.”

Subsequently, Jet Airways canceled numerous flights and left thousands of passengers stranded. 3 more pilots heard the decision that they are laid off.

And just as a reminder, the world was still amidst a financial crisis. By no means was the financial situation of Jet Airways healthy.

So, pilots going on strike just added to the difficulties. After adopting a hard stance, Jet Airways eventually caved in and talked with the pilots.

Yet finally, the airline also stopped bleeding money. While Kingfisher and Air India, the national flag carrier of India, were accumulating losses, Jet Airways met 2010 with a smile. The company‘s books were again in the green.

The airline optimized routes improved the efficiency of the company, added more routes, reduced operational costs (such as fuel) and started using their aircraft more.

One more Jet Airways subsidiary

Jet Airways used some innovative methods to save money. It looked at passenger consumption habits and basically reduced flight weight, by reducing the number of amenities carried on board. As a result, Jet Airways started to save a lot of money on fuel alone.

In addition, Jet Airways did something that shocked a lot of people. They already owned JetLite (formerly Air Sahara), which the company converted into a low-cost carrier. But in 2009, Jet Airways launched one more subsidiary and called it Jet Konnect. At the time the move baffled aviation experts, as now Jet Airways owned 2 subsidiaries that operated under the same, low-cost, model.

JetLite Boeing 737

In the short-term, the moves seemed to work out great. Jet Airways started to gain traction and with the financial crisis fading away, the airline flourished. The group (Jet Airways and its two subsidiaries) operated more than a fifth (20%) of flights in India.

But in the long-term? The moves were not the best. Just 3 years later, in 2012, Jet Airways merged the two low-cost subsidiaries. 2 years down the line, in 2014, Jet Konnect as a brand stopped existing.

Nevertheless, more great news followed. In 2012, the Indian government allowed foreign airlines to take up a share package in Indian carriers. Etihad lined up to buy 24% of Jet Airway’s shares, a move which the two parties finally agreed to on November of 2013.

Naresh Goyal and Jet Airways were destined for a bright future.

Mistakes

However, Jet Airways had still one more problem that was left over from the past. Low-cost carriers.

As passenger numbers in India dropped in the early 2010s, the company decided to combat that in a rather unusual way. In 2013, the full-service carrier Jet Airways decided to enter a price war with two of its biggest domestic competitors – SpiceJet and IndiGo. For one thing, those two airlines were already offering cheap flights, as that was their business model.

In contrast, Jet Airways was not. Offering cheap flights was not a smart idea, as the airline kept the high running costs. But the company somehow thought that was a good decision.

If the financial year of 2012 – 2013 was a fairly successful one, as Jet Airways reduced the amount of money they lost and posted a net loss of ₹4.8 million, 2013 – 2014 was a disaster. The airlines’ financial situation was terrible, as it posted a loss of ₹36.7 million.

Subsequently, Jet Airways ended the Jet Konnect brand and the carrier made the commitment to only offer full-service flights domestically in 2014.

Jet Konnect Boeing 737

Now, I’m no economics expert, but IATA has done an analysis of the Indian domestic passenger traffic. The analysis, which IATA published in 2018, indicates that ever since after the 2010 – 2013 slump in traveler numbers, the demand for air travel had risen once again since 2014 and has been steadily growing.

However, the same analysis posted a chart, that around 5% of the Indian households were classified as middle-class.

You add the two together and the conclusion is very clear – the demand for low-cost travel at the time (and still now) is very high. Simply put, not a lot of people can afford to travel domestically or internationally on full-service carriers, as tickets are expensive.

This has allowed low-cost carriers, namely IndiGo, to capture a lot of the domestic market.

A shroud of success

The next year, Jet Airways managed to reduce its losses significantly. Everything seemed to work out fine for the privately owned airline and it looked like the carrier will dominate the Indian market yet again.

So much so, that for the first time in 6 years, the airline made an actual profit! If Jet Airways enjoyed the sunshine of success in 2016, 2017 brought out the first clouds in the sky, as profits took a slight hit.

This is where the trouble began, as IndiGo started to dominate the local market. Slowly, but surely, Jet Airways’ position as the number one airline in India eroded. As they lost the domestic battle, the international skies provided absolutely no chance for the airline. Jet Airways simply could not compete with Emirates, Singapore Airlines or the likes.

Essentially, they put themselves in the corner. Their domestic demand crumbled and they had no chance to squeeze in between the big players in aviation.

Meanwhile, while Jet Airways operated on very thin margins, fuel prices surged massively. As time went on, the company yet again started bleeding money. Massively.

Buying out Jet Airways is a very lucrative idea for a lot of investors, including Etihad, which indicated that they want to increase their stake at the airline from 24% to 49%. (The Indian law prevents a foreign airline holding a majority in an Indian carrier.)

But there is one more problem – the chairman of the airline, Naresh Goyal. Multiple investors, as well as Etihad, have said that if Goyal does not step down, no deal will come through.

The former Jet Airways chairman, Naresh Goyal

But after stubbornly holding on for his chair, at the end of March he finally stepped down.

And this is the moment where we land today – On May 10, 2019.

The current situation of Jet Airways

As of now, we all know what the situation at the airline is.

After consistently missing payments, one by one, lessors began withdrawing their aircraft from Jet Airways’ fleet. In addition, the Indian Oil Corporation refused to serve any fuel to the airlines‘ aircraft for the same reason.

Jet Airways grounded fleet

In December 2018, the airline operated 123 aircraft. Not even a year later, the airline departed for its last flight (for now) on April 18th, 2019.

Riddled with massive debts and no emergency funds, the airline is looking for a hero to save them. Question is, is it too late?

The Indian government already allocated the airlines‘ aircraft and slots to rival airlines, which means that the airline has virtually no assets and it‘s value crumbles by the day.

However, Jet Airways‘ staff are the saving grace here, as they are committed to continuing working for the airline. The staff met an Indian politician, Devendra Fadnavis. He assured that the government of Maharashtra (a state in India) will also make a move if nobody puts out a bid.

If I were to predict the outcome of the whole ordeal, I‘d say that Jet Airways is destined to bankruptcy. The fact that the Indian government gave away the company‘s aircraft and slots, coupled with Jet Airways‘ debt of $1.2 billion, makes it a pretty unattractive package.

But whatever the 6 PM deadline will bring to the table, Jet Airways will always be engrained in India‘s history of aviation. The airline absolutely rocked the aviation market in the 90s and raised the quality of passenger experience in the country.

And while the heroic efforts of the employees are truly remarkable, this might be the end for the most successful private airline in India.

Recent developments

UPDATE: As of May 13th, only Etihad Airways have submitted a proper bid. However, the problem is that Etihad is currently suffering massive financial losses and is looking for a majority partner to help them with the take-over. The Abu Dhabi based carrier is looking to remain a minority stakeholder. Eithad Airways have had their fair share of bad luck in the investment department recently, as they had to pull out from the bankrupt Italian carrier Alitalia. Air Berlin was an unsuccessful investment as well, as the German airline ceased operations in 2017.

With these developments in mind, the future of Jet Airways has become even grimmer. Leasing companies are deregistering more and more of the Indian carrier's aircraft and time is running out to save the troubled Jet Airways.